October is a busy month for Social Security, with the program releasing key changes that will take place in the upcoming year.
One of the most anticipated numbers is the cost-of-living adjustment (COLA), which increases recipients' benefits based on inflation for the year (though many would argue it's not enough). Since the Social Security COLA directly affects retirees' monthly benefits, it gets a lot of attention, and rightly so.
However, the COLA is not the only important number that Social Security released in October. It has also recently announced the new wage base limit for 2025: $176,100.
The wage base limit doesn't get nearly as much attention as the COLA, but it has tax and potential benefit implications that make it worth paying attention to.
Image source: Getty Images.
Why should people pay attention to the wage base limit?
Most U.S. workers pay Social Security payroll taxes all through their careers. The current tax is 12.4%, typically split in half between workers and employers at 6.2% each (self-employed people pay for the full 12.4%).
Thankfully, not all your income is subject to Social Security payroll, only up to a certain amount. This threshold is the wage base limit. Any earnings above the wage base limit are free from Social Security payroll taxes.
So, in the case of 2025, any amount earned above $176,100 will be exempt. Someone who earns $176,101 and someone who earns $1 million in 2025 will pay the same amount of Social Security payroll taxes for the year.
Since any earnings above the wage base limit aren't subjected to Social Security payroll taxes, they're also not considered when Social Security calculates your monthly benefit.
How is the wage base limit determined?
Social Security uses the national average wage index (NAWI) -- which measures the average annual wages for workers covered under Social Security -- to determine the annual wage base limit.
Here are the past 10 NAWIs:
| Year | National Average Wage Index |
|---|---|
| 2023 | 66,621.80 |
| 2022 | 63,795.13 |
| 2021 | 60,575.07 |
| 2020 | 55,628.60 |
| 2019 | 54,099.99 |
| 2018 | 52,145.80 |
| 2017 | 50,321.89 |
| 2016 | 48,642.15 |
| 2015 | 48,098.63 |
| 2014 | 46,481.52 |
Data source: Social Security Administration.
Here's how the 2025 wage base limit compares to previous years
Aside from the tax implications, it's helpful to know the past wage base limits, because that determines if you'll be eligible to receive the maximum monthly Social Security benefit whenever you decide to claim benefits.
To be eligible to receive the maximum monthly benefit, you must have earned at least the wage base limit in each of the 35 years that Social Security uses to calculate your benefit. Earning below the wage base limit in any of those would automatically disqualify you from the maximum.
For perspective, here are the past 10 wage base limits:
| Year | Wage Base Limit |
|---|---|
| 2024 | $168,600 |
| 2023 | $160,200 |
| 2022 | $147,000 |
| 2021 | $142,800 |
| 2020 | $137,700 |
| 2019 | $132,900 |
| 2018 | $128,400 |
| 2017 | $127,200 |
| 2016 | $118,500 |
| 2015 | $118,500 |
Data source: Social Security Administration.
If you've managed to earn at least the wage base limit in the 35 years used in your calculation, the second step is to delay claiming benefits until you turn 70 (the last age they increase).
The vast majority of people won't be eligible for the maximum benefit, but it's worth keeping an eye on the wage base limit each year if that's a goal of yours.
